EU seeks to boost credentials by looking south of the Río Bravo

It has been customary for European leaders to display their Atlanticist credentials by championing a free trade agreement between the EU and the United States. The logic being that the two already have the biggest trading relationship in the world and a free trade area would cement that relationship.

The Spanish government under José Maria Aznar did so, as have many of the European Parliament’s more pro-US members. German Chancellor Angela Merkel recently became the latest European leader to express her interest in what its proponents hope would do for transatlantic trade what NATO did for transatlantic military co-operation.

The start of negotiations for a future association agreement which would include a free trade agreement is currently being discussed between the EU and the Andean Community, Peru, Ecuador, Columbia and Bolivia.

Colombia’s vice-president Francisco Santos recently said that talks could begin early next year. While that seems ambitious, there is pressure to move forward, although the bloc faces some challenges.

The Andean Community’s four members could be reduced to three, with Bolivia joining the Mercosur regional bloc. Venezuela left the Andean Community this year, before joining the Mercosur group, arguing that Columbia and Peru should not have signed separate trade agreements with the US.

Bolivian president Evo Morales shares Hugo Chávez’s views on the subject and has been criticising the free trade agreements signed between certain members of the Andean Community and the US, showing his disapproval of such agreements. Bolivia may then put obstacles before a free trade agreement with the EU. Morales would like better market access for the goods from the Andean Community.

A long-planned FTA with Mercosur has been revitalised in the wake of Doha’s suspension.

Brazil’s foreign ministry announced on 21 September that the EU and Mercosur are to resume talks for a trade agreement on 19-20 October 2006 in Rio de Janeiro.

Mercosur’s members are Brazil, Argentina, Uruguay and Paraguay and, since 4 July 2006, Venezuela, Peru, Chile, and Bolivia are associate members.

Talks with the EU have been going on indefinitely since the negotiations started in 2000.

Andreas Schneider, a specialist in EU trade and agricultural policy from the European Centre for Policy Studies, says that in 2004 the EU and Mercosur were very close to reaching an agreement, but that the talks stalled because “on the one hand, [the then] trade commissioner Pascal Lamy was replaced by Peter Mandelson and, secondly, everyone believed in the imminent success of the Doha round”. Mercosur and the EU have failed to reach an agreement until now because of their divergences. The EU is asking Mercosur to open up its industrial and public procurement markets. But Mercosur is also asking the European countries to cut down on subsidies to their farmers and reduce their barriers on agricultural imports (especially for beef, sugar and cereals).

Venezuela will be participating in talks between the EU and Mercosur for the first time. Considering Hugo Chávez’s stance on sustainable trade, and considering Venezuela’s economic and political influence in the region, Venezuela’s membership will probably make talks even more complicated.

The population of Mercosur is more than 250 million people now that Venezuela has joined the group. It has a gross regional product of over one trillion dollars and regional trade above $300 billion (€237bn).

Despite being criticised for mimicking the US’ free trade agreement with Central America the EU has said it would like to begin negotiations on a free trade agreement with Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama by the end of the year. But the forging of a customs agreement must come before any free trade agreement, despite progress on the former being slow.

On a smaller scale the EU’s member states are currently considering a proposal from the Commission to open talks on a bilateral trade and investment enhancement agreement with Canada.

The EU currently has agreements on the free trade in goods with Mexico which entered into force in 2000 and with Chile (2003).